Sugar tariffs to provide relief against the surge of imports

Sep 6, 2018

The Chief Director for agro-processing at the Department of Trade and Industry (the dti), Ms Ncumisa Mcata-Mhlauli says the recently endorsed International Trade and Administration Commission (ITAC) recommendation by Minister Rob Davies to adjust the sugar and increase import duty of US$680/ton will provide the immediate relief required by the industry and protection against the surge of imports.

Mcata-Mhlauli together with ITAC representatives were briefing the portfolio committee on Trade and Industry on the sugar industry tariffs in Parliament.

According to Mcata-Mhlauli, tariffs forms part of a set of measures considered by government in collaboration with industry in order to improve the sustainability of the industry and future prospects. She said holistic solutions are required to improve the sustainability of the sugar industry overall.

“In the long-term the industry will have to diversify and expand into new industries. At the moment, the industry is currently protected by Dollar based reference price which according to the South African Sugar Association is not responsive enough to protect the local industry,” said Mcata-Mhlauli.

The South African Sugar Association (SASA) Vice Chairman, Mr Hans Hackmann said as the industry they continue find themselves on the wrong side of the scale even with the current sugar tariff.

“We have done some work on the outcome of the $680 tariff and we concluded that it is not sufficient to sustain our industry at this current level and within the next twelve months we probably can sustain the operation of the fourteen sugar mills only, I think our producers will earn negative margins and will be unprofitable,” said Hackmann.

Hackmann added that in next three years, even if one assumes a significant improvement in world sugar market prices, a weak exchange rate (protecting the local market from imports and inflating the Rand value of exports), and a highly efficient industry with costs increasing at only 5% per annum, a shrinking of the industry is inevitable.

The South African Sugar Association will engage with International Trade and Administration Commission and other relevant stakeholders to look at the long term sustainability of the industry.